NOTICE OF DISHONOR in Negotiable Instruments

Sec. 89. To whom notice of dishonor must be given. - Except as herein otherwise provided, when a negotiable instrument has been dishonored by non-acceptance or nonpayment, notice of dishonor must be given to the drawer and to each indorser, and any drawer or indorser to whom such notice is not given is discharged.

MEANING OF NOTICE
By notice of dishonor is meant bringing either verbally or by writing, to the knowledge of the drawer or indorser of an instrument, the fact that a specified negotiable instrument, upon proper proceedings taken, has not been accepted or hasnt been paid, and that the party notified is expected to paid it

NECESSITY AND PURPOSE OF NOTICE

When an instrument is dishonored by NON-ACCEPTANCE or NON-PAYMENT, notice of such dishonor must be given to persons secondarily liable, as the case may be. Otherwise, such parties are discharged

BURDEN OF PROOF
It is upon the plaintiff who seeks to enforce the defendants liability upon a negotiable instrument as indorser to establish said liability by proving that notice was given to the defendant within the time and in the manner required by the law that the instrument in question had been dishonored Where these facts are not proven, the plaintiff doesnt sufficiently establish the defendants liability Where there is no proof in record tending to show that the plaintiff gave any notice whatsoever to the defendant that the instrument in question had been dishonored, said plaintiff hasnt established its cause of action PERSONS PRIMARILY LIABLE NEED NOT BE NOTIFIED DOES FAILURE TO GIVE NOTICE OF DISHONOR OF A PREVIOUS INSTALLMENT TO PERSONS SECONDARILY LIABLE ALSO DISCHARGE THEM ON THE SUCCEEDING INSTALLMNETS? It depends on whether the instrument contains an acceleration clause

RULE WHERE THERE IS NO ACCELERATION CLAUSE

Where the instrument contains no acceleration clause, failure to give notice of dishonor on previous installment doesnt discharge drawers and indorsers as to the succeeding installments, and therefore, the holder can file an action against them for such succeeding installments, notice is given The reason is that each separate installment is equivalent to another note

RULE WHERE THERE IS AN ACCELERATION CLAUSE

It depends whether the clause is optional or automatic If it is automatic, failure to give notice of dishonor as to a previous installment will discharge the persons secondarily liable as to the succeeding installments If it is optional and it is not exercised, the rule would be the same as where there is no acceleration clause

EXCEPTIONS TO REQUIREMENT OF NOTICE

The law provides for exceptions on failure to give notice would discharge drawer or indorsers Sec. 90. By whom given. - The notice may be given by or on behalf of the holder, or by or on behalf of any party to the instrument who might be compelled to pay it to the holder, and who, upon taking it up, would have a right to reimbursement from the party to whom the notice is given.

NOTICE MAY BE GIVEN BY

1. The holder 2. Another in behalf of the holder 3. Any party to the instrument who may be compelled to pay it to the holder against any party whom he has a right of reimbursement should such party giving notice pay the instrument 4. Another person in behalf of such party Sec. 91. Notice given by agent. - Notice of dishonor may be given by any agent either in his own name or in the name of any party entitled to given notice, whether that party be his principal or not.

NOTICE OF AGENT

 Notice may be given by the agent and it is not necessary that the agent be authorized by the principal He may give the notice in his name or in the name of his principal A collecting bank may give notice, and where it has done so, no notice from the owner is necessary And where the cashier of the drawee bank which had refused to pay a check gave the check to a notary to protest, which was done, it was held that the possession of the check by the cashier was evidence of his agency of the holder to present it for protest Sec. 92. Effect of notice on behalf of holder. - Where notice is given by or on behalf of the holder, it inures to the benefit of all subsequent holders and all prior parties who have a right of recourse against the party to whom it is given.

MEANING OF BENEFIT
Benefit refers to the right to charge the person secondarily liable who received notice The party to whom this benefit inures can charge the party receiving notice of dishonor, even if himself didnt give the notice

INURES TO THE BENEFIT OF THE FOLLOWING

1. All parties prior to the holder, who have a right of recourse against the party to whom the notice is given 2. All holders subsequent to the holder giving notice Sec. 93. Effect where notice is given by party entitled thereto. - Where notice is given by or on behalf of a party entitled to give notice, it inures to the benefit of the holder and all parties subsequent to the party to whom notice is given.

APPLICATION OF THIS SECTION

Follows the same principle as the preceding section but this time, the person giving notice is not the holder but a party to the instrument who might be compelled to pay it to the holder, and who, upon taking t up, would have a right of reimbursement from the party to whom notice is given Sec. 94. When agent may give notice. - Where the instrument has been dishonored in the hands of an agent, he may either himself give notice to the parties liable thereon, or he may give notice to his principal. If he gives notice to his principal, he must do so within the same time as if he were the holder, and the principal, upon the receipt of such notice, has himself the same time for giving notice as if the agent had been an independent holder.

WHEN AGENTS NOTICE MUST BE GIVEN

 When an instrument is dishonored in the hands of an agent, he can do either of the following o Directly give notice to the persons secondarily liable thereon o Give notice to his principal If the agent decides to give notice to the principal, he must give notice within the time allowed by law as if he were a holder The principal has also the same time to give notice to the persons secondarily liable Sec. 95. When notice sufficient. - A written notice need not be signed and an insufficient written notice may be supplemented and validated by verbal communication. A misdescription of the instrument does not vitiate the notice unless the party to whom the notice is given is in fact misled thereby. Sec. 96. Form of notice. - The notice may be in writing or merely oral and may be given in any terms which sufficiently identify the instrument, and indicate that it has been dishonored by non-acceptance or non-payment. It may in all cases be given by delivering it personally or through the mails.

FORM AND CONTENTS OF NOTICE

It may be oral or in writing Whether oral or in writing, it must contain 1. SUFFICIENT DESCRIPTION OF THE INSTRUMENT TO IDENTIFY IT, and 2. A STATEMENT THAT IT HAS BEEN PRESENTED FOR PAYMENT AND FOR ACCEPTANCE, AND THAT IT HAS BEEN DISHONORED, and 3. A STATEMENT THAT THE PARTY GIVING NOTICE INTENDS TO LOOK FOR THE PARTY ADDRESSED FOR PAYMENT

EFFECTS OF DEFECTS IN NOTICE

If the notice is not signed, it will not invalidate it If the notice is written and doesnt contain #2 and #3, it can be supplemented by oral communication stating the things lacking If there is misdescription, it would only vitiate the notice if the person is misled thereby

NOTICE BY PHONE
This could be done however it must be shown that the party to be notified was really communicated with, that is, fully identified as to the party at the receiving end of the line

MANNER OF GIVING NOTICE

May be given by personal delivery or by mail

Sec. 97. To whom notice may be given. - Notice of dishonor may be given either to the party himself or to his agent in that behalf.

NOTICE MAY BE GIVEN

1. To the party himself 2. To his agent in his behalf An accommodation indorser is entitled to notice An irregular indorser must also be given notice if he is to be charged And if notice is given to an agent, he must be duly authorized to receive the notice of dishonor

AGENT DISTINGUISHED FROM PERSON PRESENT IN ABSENCE OF PARTY

Notice to agent must be distinguished from notice attempted to be given to party himself where he is absent at his place of business or residence. In such a case, the notice may be left with anyone found in charge therein Sec. 98. Notice where party is dead. - When any party is dead and his death is known to the party giving notice, the notice must be given to a personal representative, if there be one, and if with reasonable diligence, he can be found. If there be no personal representative, notice may be sent to the last residence or last place of business of the deceased.

REQUISITES FOR NOTICE TO REPRESENTATIVE

1. 2. 3. Death is known to the party giving notice There is a personal representative If with reasonable diligence he could be found

WHEN NOTICE MAY BE SENT TO THE LAST RESIDENCE OR PLACE OF BUSINESS

1. If his death is not known to the party giving notice 2. Or although his death is known to the party giving notice but there is no personal representative 3. If there be one but he cannot be found with reasonable diligence Sec. 99. Notice to partners. - Where the parties to be notified are partners, notice to any one partner is notice to the firm, even though there has been a dissolution.

Sec. 100. Notice to persons jointly liable. - Notice to joint persons who are not partners must be given to each of them unless one of them has authority to receive such notice for the others. PROVISION WOULD APPLY ONLY TO JOINT DRAWERS Sec. 101. Notice to bankrupt. - Where a party has been adjudged a bankrupt or an insolvent, or has made an assignment for the benefit of creditors, notice may be given either to the party himself or to his trustee or assignee.

APPLICATION OF SECTION
1. 2. Where the party secondarily liable has been declared a bankrupt or an insolvent Where he has made an assignment of his properties for the benefits of creditors In such cases, notice be given to the party himself or his trustee or assignee

Sec. 102. Time within which notice must be given. - Notice may be given as soon as the instrument is dishonored and, unless delay is excused as hereinafter provided, must be given within the time fixed by this Act.

MAY NOTICE OF DISHONOR BE GIVEN BEFORE THE DATE OF MATURITY

No, such notice would be insufficient because an instrument cannot be said to be dishonored for non-payment unless presented and presentment must be made on the date of maturity unless of course, presentment is excused But even in such cases, the instrument cannot be said to be dishonored by nonpayment unless it is overdue and unpaid Notice of dishonor can be given only after the instrument has been actually dishonored, and notice given before the paper due is premature and insufficient, regardless of the indorsers knowledge that the maker was in default

MAY NOTICE OF DISHONOR BE GIVEN ON THE DATE OF MATURITY?

Yes, provided that the instrument has been presented for payment and is has been dishonored But if the instrument is payable at a bank, it is not dishonored if the maker deposits the amount of the instrument before the close of banking hours. Hence, notice of dishonor must be given after the close of banking hours on the date of maturity

PURPOSE OF PROMPT NOTICE

 To give the persons secondarily liable every opportunity to secure themselves such as to enable the party to be charged to preserve and protect his rights against prior parties

Sec. 103. Where parties reside in same place. - Where the person giving and the person to receive notice reside in the same place, notice must be given within the following times: (a) If given at the place of business of the person to receive notice, it must be given before the close of business hours on the day following. (b) If given at his residence, it must be given before the usual hours of rest on the day following. (c) If sent by mail, it must be deposited in the post office in time to reach him in usual course on the day following. Sec. 104. Where parties reside in different places. - Where the person giving and the person to receive notice reside in different places, the notice must be given within the following times: (a) If sent by mail, it must be deposited in the post office in time to go by mail the day following the day of dishonor, or if there be no mail at a convenient hour on last day, by the next mail thereafter. (b) If given otherwise than through the post office, then within the time that notice would have been received in due course of mail, if it had been deposited in the post office within the time specified in the last subdivision. (TO REACH HIM IN USUAL COURSE THE DAY FOLLOWING)

TIME FOR GIVING NOTICE IN GENERAL

The law provides for a different period for giving notice of dishonor depending on whetherthe party giving notice and the party to receive notice reside in the same place; or the party giving notice and the party to receive reside in different places

MEANING OF THE SAME PLACE

Refers to the corporate limits of a town or city where the presentment is made or where the holder resides

EFFECT OF NOTICE GIVEN OUT OF TIME

Unless excused, notice given out of time would be considered not to have been given

Hence, the party to receive notice would be discharged

Sec. 105. When sender deemed to have given due notice. - Where notice of dishonor is duly addressed and deposited in the post office, the sender is deemed to have given due notice, notwithstanding any miscarriage in the mails. APPLICATION OF SECTION 105 A party giving notice is deemed to have given due notice where the notice of dishonor is duly addressed and deposited in the post office, even when there is miscarriage of mail CONCLUSIVE PRESUMPTION Sec. 106. Deposit in post office; what constitutes. - Notice is deemed to have been deposited in the post-office when deposited in any branch post office or in any letter box under the control of the post-office department.

DEPOSIT IN LETTER BOX

The letter box must be under the control of the post office department Otherwise, notice wouldnt deemed to have been deposited in the post office Thus, a notice of protest properly addressed and left in a place in a notarys office where mail was usually collected by his postman was held not a mailing of the notice as required by the statute Sec. 107. Notice to subsequent party; time of. - Where a party receives notice of dishonor, he has, after the receipt of such notice, the same time for giving notice to antecedent parties that the holder has after the dishonor. Sec. 108. Where notice must be sent. - Where a party has added an address to his signature, notice of dishonor must be sent to that address; but if he has not given such address, then the notice must be sent as follows: (a) Either to the post-office nearest to his place of residence or to the post-office where he is accustomed to receive his letters; or (b) If he lives in one place and has his place of business in another, notice may be sent to either place; or (c) If he is sojourning in another place, notice may be sent to the place where he is so sojourning. But where the notice is actually received by the party within the time specified in this Act, it will be sufficient, though not sent in accordance with the requirement of this section. Sec. 109. Waiver of notice. - Notice of dishonor may be waived either before the time of giving notice has arrived or after the omission to give due notice, and the

waiver may be expressed or implied.

WHEN WAIVER MAY BE MADE

1. Before the time of giving notice, such as express waiver in the body of the instrument or added to the signature of the party 2. After omission to give due notice IMPLIED WAIVER Waiver may be implied from acts, declarations, or silence Sec. 110. Whom affected by waiver. - Where the waiver is embodied in the instrument itself, it is binding upon all parties; but, where it is written above the signature of an indorser, it binds him only. WHOM AFFECTED BY WAIVER IN GENERAL The persons affected by waiver depends upon whether the waiver is in the instrument itself or is written above the signature of the indorser If the waiver is embodied in the instrument itself, it is binding upon all parties If the waiver is written above the signature of an indorser, it binds him only Sec. 111. Waiver of protest. - A waiver of protest, whether in the case of a foreign bill of exchange or other negotiable instrument, is deemed to be a waiver not only of a formal protest but also of presentment and notice of dishonor.

WHERE PROTEST IS WAIVED, THE FOLLOWING ARE INCLUDED AND ARE DEEMED WAIVED ALSO
1. 2. Presentment Notice of dishonor Where presentment for payment is waived, notice of dishonor is also waived But where notice of dishonor is waived, presentment for payment is not waived

Sec. 112. When notice is dispensed with. - Notice of dishonor is dispensed with when, after the exercise of reasonable diligence, it cannot be given to or does not reach the parties sought to be charged.

WHEN NOTICE EXCUSED

When political disturbances interrupt and obstruct the ordinary negotiations of trade, they constitute a sufficient excuse for want of presentment or notice, upon the

same principle that controls in cases of military operations or interdictions of commerce Prevalence of a malignant, contagious, infectious disease Sec. 113. Delay in giving notice; how excused. - Delay in giving notice of dishonor is excused when the delay is caused by circumstances beyond the control of the holder and not imputable to his default, misconduct, or negligence. When the cause of delay ceases to operate, notice must be given with reasonable diligence. Sec. 114. When notice need not be given to drawer. - Notice of dishonor is not required to be given to the drawer in either of the following cases: (a) Where the drawer and drawee are the same person; (b) When the drawee is fictitious person or a person not having capacity to contract; (c) When the drawer is the person to whom the instrument is presented for payment; (d) Where the drawer has no right to expect or require that the drawee or acceptor will honor the instrument; (e) Where the drawer has countermanded payment. Sec. 115. When notice need not be given to indorser. Notice of dishonor is not required to be given to an indorser in either of the following cases: (a) When the drawee is a fictitious person or person not having capacity to contract, and the indorser was aware of that fact at the time he indorsed the instrument; (b) Where the indorser is the person to whom the instrument is presented for payment; (c) Where the instrument was made or accepted for his accommodation.

WHEN NOTICE RELATIVELY EXCUSED

1. Where he has knowledge of the dishonor by means other than through a formal notice, as when he is both the drawee and drawer or when presentment is made to him 2. Where he has no reason to expect that the instrument will be honored, as when he has countermanded payment or where the drawee is fictitious or without capacity to contract

NO RIGHT TO EXPECT OR REQUIRE PAYMENT AS TO DRAWER

1. 2. 3.

Where the drawer of the check has no account with the drawee bank When the drawer of a check payable abroad has no funds with the drawee bank to meet it When the knowledge that previous drafts on the same consignee had been dishonored. In the foregoing, the drawer has no right to receive notice of dishonor

DRAWER HAS COUNTERMANDED PAYMENT

A drawer tells drawee B not to pay the bill. F holder need not give notice to A drawer. An allegation that payment of a check had been countermanded is sufficiently set out where the check was set forth with the indorsement across the face Payment stopped

DRAWEE FICTITIOUS, ETC. MUST BE MADE KNOWN AS TO INDORSERS

The indorser must be aware of the fact that the drawee is fictitious or not having capacity to contract. Otherwise, notice of dishonor must be given to such indorser to charge him. But the fact that that the indorser knew the maker to be insolvent or that the instrument was dishonored doesnt dispense with the necessity of notice Sec. 116. Notice of non-payment where acceptance refused. - Where due notice of dishonor by non-acceptance has been given, notice of a subsequent dishonor by nonpayment is not necessary unless in the meantime the instrument has been accepted. Sec. 117. Effect of omission to give notice of non-acceptance. - An omission to give notice of dishonor by non-acceptance does not prejudice the rights of a holder in due course subsequent to the omission.

SUMMARY AS TO NOTICE OF DISHONOR

1. Like presentment for payment, notice of dishonor need not be given to persons primarily liable in order to charge them 2. But aside from presentment for payment to persons primarily liable, notice of dishonor to persons secondarily liable is necessary to charge the latter except a. When notice is waived b. When dispensed with under Section 112 c. As to drawer, under Section 114 d. As to indorser, under Section 115 e. Where due notice of dishonor by non-acceptance has been given f. As to a holder in due course without notice Sec. 118. When protest need not be made; when must be made. - Where any negotiable instrument has been dishonored, it may be protested for non-acceptance or nonpayment, as the case may be; but protest is not required except in the case of

foreign bills of exchange.

WHEN PROTEST NECESSARY

Protest is necessary with regard foreign bills of exchange Mere fact of protest is not conclusive upon the dishonor of the instrument and due notice to the indorser; other evidence is competent on these questions While protest is not required in cases of promissory notes and inland bills, it is usual to protest these instruments also when dishonored since the notarys certificate of protest is the most convenient and certain mode of proving the facts